Various check verification methods are in the prior art. Some of these check verification methods are designed to be made available at point-of-sale (POS) terminals, which may be operated by a customer. Such POS terminals communicate with a remotely located transaction processor and the POS terminal may provide the information to an the Automated Clearing House (ACH) Network. The ACH Network is a highly reliable and efficient nationwide batch-oriented electronic funds transfer system governed by the National Automated Clearing House Association which provides for inter-bank clearing of electronic payments for participating depository financial institutions. The Federal Reserve and Electronic Payments Network act as ACH operators which are central clearing facilities through which financial institutions transmit or receive ACH entries.
Check verification is governed by the “Check Clearing for the 21st Century Act” (Check 21) which was signed into law on Oct. 28, 2003, and became effective on Oct. 28, 2004 (H.R. 1474). Check 21 is designed to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation. The Check 21 law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, process check information electronically, and deliver substitute checks to banks that want to continue receiving paper checks. A substitute check is the legal equivalent of the original check and includes all the information on the original check.
The “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (USA Patriot Act) was signed into law on Oct. 24, 2001 (H.R. 3162). Section 326 of the USA Patriot Act is entitled “Verification of Identification” and requires that financial institutions and others know their customers. This federal regulation requires financial institutions and others to implement a customer identification program. Besides verifying the identity of any person seeking to open an account, or for maintaining records of the information used to verify a person's identity, including name, address, and other identifying information, this section of the USA Patriot Act also calls for consulting lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency to determine whether a person seeking to open an account appears on any such list.
With the enactments of the Check 21 Act and section 326 of the USA Patriot Act, it is important to provide a check processing system that complies with the law and provides added security to financial transactions thereby reducing check fraud, money laundering and the use of money for acts of terror.